Australian Politics Forum

‘No stopping it’: Aldi supermarket chain reaches ‘critical mass’

   November 19, 2014
   NEWS.com.au

Aldi has reached the critical mass it needs to achieve private label scale.    :)

IT’S good news for consumers, but bad news for the supermarket duopoly. German discount chain Aldi has just reached “critical mass” in Australia, a new report says.

According to global banking giant Morgan Stanley, the point of critical mass is 350 stores and $A4.03 billion in sales. “This is the point when private label scale is achieved, which is critical for discounters’ buying terms,” the authors write.

The report quotes senior Aldi executives who argue that while discounters initially struggle as country-by-country tastes differ and building scale takes time, “once the discounter reaches critical mass there is no stopping it”.

Much like Australia is now seeing, the UK supermarket industry had a golden run dominated by the likes of Tesco and Sainsbury’s. Australia is a “golden opportunity as there are no hard discounters”, the executive says.

“The Aldi format works best when there is a 20 per cent-plus differential in pricing to national brands at the full-line supermarkets. At this point consumers are prepared to trade off choice for price,” write the report’s authors.

“Given the high fixed cost nature of supermarkets, if [Woolworths, Wesfarmers and Metcash] volumes decline, margins would decline rapidly too.”

It adds that Aldi’s cost-to-sales ratio is two thirds that of the major supermarkets and works better in countries with high labour cost like Australia.

The Morgan Stanley report also highlights the opportunity in WA and South Australia. “All supermarket margins are higher in SA / WA, since price points tend to be 6-7 per cent higher and the cost of transportation to these markets is ~2.5 per cent,” it says.

“Consumers are typically more value-focused in WA/SA compared to the East Coast, so the opportunity for Aldi is significant.”

The discount chain is targeting 70 to 75 stores in WA, and aims to have 20 stores operating within the first six to eight months following the completion of the distribution centre in mid-2016.

The report also notes that suppliers are standing on firmer ground following the Australian Competition and Consumer Commission’s recent crackdown on the big supermarkets, giving them better leverage to push back on negotiations.

“Suppliers are gradually passing on price rises — by contrast, a few years ago price rises were non-existent. The larger suppliers are also beginning to use data to better understand the impact of discounting and promotions which will influence their future trade spending.”

Tom Godfrey, spokesman for consumer group Choice, said it was great news for consumers. “I think it’s vital that Australia has a strong competitive third player in the supermarket sector,” he said.    :)

“We’ve seen when Aldi enters other markets, the ‘Aldi effect’ occurs and prices come down across the board. It’s great for consumers and it highlights how good Coles and Woolies have had it for so long.”

Mr Godfrey said it consumers should question the need to be loyal to individual stores, regardless of what inducements they offer through reward programs. “It’s critical to look for the best deal on any given day. Don’t assume because you’re part of a loyalty program you’re getting the best price.”

Woolworths and Wesfarmers shares both took a battering today. Wesfarmers closed down 1.79 per cent at $42.89; Woolworths was down 2.24 per cent at $32.26.

What a good supermarket Aldi is. [smiley=thumbsup.gif]

This taming and regulating of the concept of "critical mass", is deeply disturbing.

"Critical mass" is a very important, infact, critical, concept of human demographics. They seem to have usurped the term as a kind of amway gold level award.

anyway...

I think they are saying, like with bunnings, the quality has been reduced to bring us lower prices for a while until they get big enough to put their prices up to the level of the other big players, yet still give us crappy merchandise.

Difference with aldi and bunnings is, bunnings will sell you a tool that breaks, while aldi will sell you one you had no need of buying in the first place.

Everyone acts in sort of frenzy at aldi. It's incredibly difficult to leave if you don't buy anything. There's literally no way to get out. ;D

yet the prices on grocerys are really no different than woolies or coles. People just want to believe it's exiting so they do.

wrote on Nov 20^th, 2014 at 5:46am:

What a good supermarket Aldi is. [smiley=thumbsup.gif]

20% cheaper than Coles and Woollies and brand names that charge extra for being well known.

Wouldn't you rather have the 20% savings in your pocket?

Aldi....great products, great service, easy parking.....a toilet would be nice, but then they'd have to put the prices up.....nah I'll go before I visit Aldi, too easy.

DifferentFrequency wrote on Nov 20^th, 2014 at 6:15am:

yet the prices on grocerys are really no different than woolies or coles.

They are.

Woollies/Coles.....Nescafe coffee sachets 10 pack $7.25

http://shop.coles.com.au/online/national/nescafe-cafe-menu-coffee-cappuccino-9577540p

Aldi.....Alcafe coffee sachets 10 pack $3.49

https://www.smartershopping.com.au/browse.aspx

both delicious.....yum

Ok now whats thd woolies brand coffee cost? And the nescafe at aldi?

What if I don't want coffee? Do I have to by a crappy guitar or whatever liquidated rubbish they have on sale and drink that?

I always check in big w before crazy clarks. Because big w has

A. What you are looking for consistently.

B. It's cheaper! And it is.

C. It's better quality.

AND

there's a thing called budgeting! It doesn't work if you are making impulse purchases.

if I want to do impulse shopping I go to CLOTHES boutiques, not a junk shop.

(I only posted that because I'm not allowed to post images yet. I was going to post A. A pic of a teenage girl crying at a Beatles concert. Or B. A picture of 'malk' from the simpsons instead of milk)

Also. You are spamming. >:(

DifferentFrequency wrote on Nov 20^th, 2014 at 7:04am:

Also. You are spamming. >:(

Says the ID with 20 posts to the ID with over 18 thousand.

If you desire designer coffee

so be it

all is as it

should be

*Namaste*

Ex Dame Pansi wrote on Nov 20^th, 2014 at 7:24am:

DifferentFrequency wrote on Nov 20^th, 2014 at 7:04am:

Also. You are spamming. >:(

Says the ID with 20 posts to the ID with over 18 thousand.

If you desire designer coffee

so be it

all is as it

should be

*Namaste*

^this is clear cut evidence that we fought on the wrong side in ww2. :-[

Unlike coffee. Rice is a staple.

DifferentFrequency wrote on Nov 20^th, 2014 at 7:31am:

Unlike coffee. Rice is a staple.

You wash your mouth out with soap you ruffian....
coffee is just as much a staple as rice ...

at least at my place it is ;)

John Smith wrote on Nov 20^th, 2014 at 8:26am:

DifferentFrequency wrote on Nov 20^th, 2014 at 7:31am:

Unlike coffee. Rice is a staple.

You wash your mouth out with soap you ruffian....
coffee is just as much a staple as rice ...

at least at my place it is ;)

For me too John. I could cope without lots of things, but coffee.......is my life line....well almost, tea is a poor substitute.

Another shop full of crap. ::)

.

I can't help but wonder if imcrookonit and bogarde are paid in deutsche marks
- for this seemingly endless line of anti-Australian ALDI promotional propaganda

i

Have been following the Tesco story in the UK.

Tesco, by far the biggest supermarket chain in the UK, is in big trouble with its accounts and the financial regulator.
What has emerged into the open is the wholesale fleecing of suppliers to bolster profits in the face of declining sales due to the growth of Aldi & others. Not only have they been blackmailing the suppliers into making massive payments, under largely off the record agreements, but what has now got them into a hole is that they have been falsely declaring much of this as profit when they haven't even yet received the payments, ie bringing the expected payments forward.

We have heard bits & pieces of information of the same kind of behaviour by Coles & Woolworths and it might well be that this behaviour will escalate in the face of the increased competition.
Fortunately we now seem to have an activist Chairman at the ACCC and maybe some of the claims will see daylight.

This all relates back to the piece I wrote recently on how consumer shopping patterns have changed and Coles & Woolworths don't have the business models to handle it.

Coffee you want?

Get yourself an Espressi machine at Aldi and enjoy café quality coffee at nothing prices.

(This has been an UNPAID comment on Aldi)

PS buzz, the Deutschmark hasn't existed for years now.

bogarde73 wrote on Nov 20^th, 2014 at 9:42am:

Nah, not a bad machine compared to others, but I prefer real coffee with fresh ground beans.

That's about like Peter Fitzsimons and the teams that wear sunglasses - an All Black colleague once imparted the wisdom that he knew they would beat the Wallabies when the Wallabies arrived wearing sunglasses.

At that point in the development of a team, the players start to see themselves as stars....

Once a store chain develops its own brand - it is wearing sunglasses and is on that downward slope..

Australian Politics Forum
http://www.ozpolitic.com/forum/YaBB.pl General Discussion >> General Board >> Aldi Supermarket Chain Reaches Critical Mass http://www.ozpolitic.com/forum/YaBB.pl?num=1416426250 Message started by imcrookonit on Nov 20^th, 2014 at 5:44am